HONDURAN INDUSTRIALISTS ASK GOV FOR DIRECT

C O N F I D E N T I A L SECTION 01 OF 03 TEGUCIGALPA 001102

SIPDIS

SIPDIS

STATE FOR EB/ESC, WHA/EPSC, WHA/PPC, AND WHA/CEN
STATE FOR D, E, P, AND WHA
TREASURY FOR JHOEK
STATE PASS AID FOR LAC/CAM
NSC FOR DAN FISK

E.O. 12958: DECL: 06/15/2016
TAGS: EPET ENRG PREL PINR VE HO
SUBJECT: HONDURAN INDUSTRIALISTS ASK GOV FOR DIRECT
PETROCARIBE DEAL

REF: A. A: TEGUCIGALPA 1026 AND PREVIOUS


B. B: SAN SALVADOR 000853

Classified By: CDA James Williard for reasons 1.4 (b,d)


1. (C) Summary: The Honduran Industrialists Association
(ANDI) has written a letter to the Government of Venezuela
seeking a direct PetroCaribe arrangement, modeled after deals
recently struck with mayors in El Salvador and Nicaragua (ref
B). PetroCaribe is a government-to-government program, so it
is unclear whether the GOV will take ANDI up on its offer.
In addition, it appears to Post that the GOH is moving
forward with a PetroCaribe-like deal in any case, which could
render such an accord with ANDI redundant and unnecessary.
ANDI President Adolfo "Fito" Facusse was a member of the
GOH-mandated Commission of Notables that recommended a
competitive international bid for fuel imports for Honduras.
It is ironic therefore, that he is willing to undermine that
very effort before it is even launched, in an attempt to sign
his own, non-competitive, non-transparent deal with
Venezuela. Facusse has long sought to get PetroCaribe into
Honduras, and was reportedly the Commission member most
responsible for raising that option. In his own defense,
Facusse says ANDI's private PetroCaribe deal would force
reform of the state run electric company, a crucial step if
CAFTA is to work for Honduras. End Summary.


2. (U) On June 12, the Honduran Industrialists Association,
led by former Commission of Notables member Adolfo "Fito"
Facusse, sent the following letter to the Embassy of
Venezuela, seeking to initiate negotiations for a PetroCaribe
deal (to "join the mechanism known as PetroCaribe or a
similar entity created for the Central American region").
ANDI is joined in its request by the National Transport
Council (CNT),one of the protagonists in recent street
protests against high fuel prices.


3. (U) Begin unofficial translation of text:

Your Excellency Mr. Claudio Sorio, Charge d'Affaires, Embassy
of the Bolivarian Republic of Venezuela

On various occasions we have had the pleasure of your
attendance at our Executive Committee and National Board of
Directors meetings, at which you have presented the generous
support programs of President Hugo Chavez, of our sister
Bolivarian Republic of Venezuela, for the neediest people,
such as our own.

This is why when I was designated by the National Congress of
our country to join the Notables Commission -- charged with
drafting recommendations to confront the problem of the high
cost of fuel -- I was able to invite you and other members of
your diplomatic mission to meetings of that Commission, which
led to, among other things, its recommendation that our
government sign an accord joining the PetroCaribe initiative
with a view towards importing, with all the benefits that
program brings, the fuel necessary for thermal generation of
electricity required by the national Electric Company (ENEE)
for its private electricity suppliers.

Unfortunately, for various reasons, that Commission
recommendation was not implemented, despite the continuing
grave energy crisis which each day impacts more on the costs
of the basic basket of goods and services that our population
requires. This crisis affects not just the cost of
transportation and of industrial production, but also impacts
-- given that 70 percent of our electricity is thermally
generated -- on the finances of ENEE (our largest state-run
enterprise) and on the cost of electricity.

Given this situation, and given that ANDI represents the
majority of productive enterprises in Honduras, from the
micros and small enterprises of the informal sector -- which
we assist through our Covelo Network -- to the medium and
large-sized agro-industrial and industrial companies, we are
formally permitted to propose to you for your government's

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consideration the signing of an agreement between the
Bolivarian Republic of Venezuela and our Association, similar
to those recently agreed to by various municipalities of El
Salvador and Nicaragua. (We seek) to join the mechanism
known as PetroCaribe or a similar entity created for the
Central American region, which, as we understand it, permits
us to pay no more than 50 percent within 60 days and no less
than 50 percent over a 25-year period, including a two-year
grace period, at one percent annual interest.

ANDI would import fuel to be used by its affiliate members,
substantially passing on to them the benefits of this
low-cost, long-term financing, in such a way as to maintain
the most stable prices possible, to the benefit of the
lowest-income Hondurans, the market for most of our
production.

We are pleased to inform you that we have submitted this
initiative to the National Transportation Council (CNT),made
up of operators of both cargo and personal transport,
including taxi drivers, as is detailed in the attached
document, and they too have promised to use the imported fuel
in support of this unique plan and exclusively by their
thousands of members nationwide.

We are conducting research on the types and volumes of fuel
required but, at this time, we anticipate our needs will
consist primarily of diesel fuel and Bunker C. It is
possible that to this consumption by ANDI and CNT members
could be added the fuel needs of electricity generators,
which would bring relief to the users of that service.

We do not know if we will have immediate use of sufficient
storage tanks, in which case we would like to request, if
possible, that you provide sufficient financing for their
construction.

We hope to conclude this agreement with the Bolivarian
Republic of Venezuela in the short term for the benefit of
the Honduran people by means of the institutions that
safeguard the interests of producers and transportation
operators, elements that are basic to our economy.

((Complimentary closing))

End unofficial translation of text.


4. (C) In a June 14 conversation with EconOff, Facusse
described his move to negotiate directly a PetroCaribe deal
with Venezuela as an attempt to preempt a similar GOH deal,
rumored to be in the works for months. He appeared extremely
confident that ANDI could make it work, investing sufficient
funds to pay back the principal while distributing savings to
ENEE and the end consumer. In exchange, Facusse feels that
he can demand needed changes to ENEE, including breaking the
energy company,s monopoly and eliminating subsidizes. He
believes that to make CAFTA work the cost of energy needs to
be lower, and that ENEE is not competitive. &Right now ENEE
is an obstacle to investment,8 he said.


5. (C) Comment: Curiously, this proposal comes prior to the
roll-out of the terms of reference for the international bid
solicitation process being developed by the GOH at the behest
of the Commission of Notables, of which Facusse was a member.
Thus, Facusse's non-competitive arrangement runs contrary to
and undermines the alleged goals of the bid process he
encouraged the GOH to implement. Given previous Facusse
statements to Post, including his championing of the
PetroCaribe option even while on the Commission, Post
assesses that Facusse was never committed to a competitive
bid process, but rather saw it as an opportunity to open the
door for PetroCaribe entry into Honduras. Facusse, however,
still maintains that a PetroCaribe-like deal for all of
Honduras, fuel would be &too dangerous8, leaving the
country in the hands of an unreliable supplier, and presents
too many political implications.


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6. (C) Comment continued: Facusse himself is a study in
contrasts: a millionaire industrialist who graduated from
MIT, but who is an admirer of Castro's Cuba and who delights
in staking out radical positions to provoke interlocutors.
However, he is also the founder of a highly successful
micro-credit enterprise, the Covelo Foundation, that supports
business development among Honduras' poorest communities, and
is consistently one of the more vocal advocates for
sustainable (that is, market-based) solutions to development.
Facusse is also unabashedly pro-CAFTA, though his proposed
solutions to Honduras' structural problems are often
unorthodox. Post does not think Facusse is a Chavez
supporter per se, but is more likely seeking a way to
alleviate the burden of high fuel prices on the poor (and on
himself and his fellow industrialists). How he plans to
repay Chavez for his "generosity", however, remains to be
seen. End Comment.

Williard
WILLIARD